Legal problem solving
PART TWO
Source of legal rights
Torts
Contract:
Express
Terms
Statute:
Consumer
Guarantees
Contents of the
Contract
TERMS
Statement prior to contract
Representation
Misrepresentation:
Not contract
Possible action in equity
or statute (s18)
Term
Puff
Not contract
No action in equity
Possible action under
statute (s18)
Part of contract
Term or representation?


Objective test of intention
“reasonable man”
Hospital Products Ltd v United States Surgical Corp (1984)
156 CLR 41
 Indicative factors include
1. Importance of statement
2. Time between statement and contract
3. Special knowledge or skill or access to truth of
one party
4. Inclusion of statement in any subsequent
document
 Ellul &Ellul v Oakes (1972) 3 SASR 377
What kind of term?
A term may be either:
a Condition
◦ Essential term
◦ Breach – entitlement to terminate/or damages
a Warranty
◦ Ancillary term
◦ Breach – damages, but no termination
an Innominate term
◦ Intermediate term
◦ Breach – termination if sufficiently serious
Test: how essential was the promise?
“The question whether a term in a contract is a
condition or a warranty, i.e. an essential or a nonessential promise, depends upon the intention of the
parties as appearing in or from the contract. The test
of essentiality is whether it appears from the general
nature of the contract considered as a whole, or from
some particular term or terms, that the promise is of
such importance to the promisee that he would not
have entered into the contract unless he had been
assured of a strict, or a substantial, performance of the
promise, as the case may be, and that this ought to
have been apparent to the promisor…. Jordan CJ in Tramways
Advertising v Luna Park
‘
Tramways Advertising Pty Ltd v Luna
Park (NSW) Ltd (1938) CLR 633
Associated Newspapers Limited v Bancks (1951) 83 CLR 322
Innominate terms: Hong Kong Fir
“There are, however, many contractual undertakings of a
more complex character which cannot be categorised as
being “conditions” or “warranties”….Of such undertakings,
all that can be predicated is that some breaches will, and
others will not, give rise to an event which will deprive the
party not in default of substantially the whole benefit which
it was intended that he should obtain from the contract;
and the legal consequences of a breach of such an
undertaking, unless provided for expressly in the contract,
depend on the nature of the event to which the breach
gives rise and do not follow automatically from a prior
classification of the undertakings as a “condition” or a
“warranty”.”
Diplock LJ 69/70
Innominate terms
Approved by High Court in
◦ Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA
61
Fridge
She also advised that her mother was having
problems with Whitegoods World from which she
had bought her fridge. Kylie advised that her
mother required a “French door” fridge with
freezer drawers underneath to accommodate the
large baking trays she used for her cakes. She had
ordered the fridge she needed from Whitegoods
World but had experienced delivery problems.
Her oven purchase was much more successful than her
fridge which, on the very day it was due to be delivered
– not only did not arrive, but the shop called her to
advise that delivery was delayed for one month. Mavis
said to the shop keeper: “Well that’s no good to me. I
ordered that fridge for today. I need that fridge today. I
told you when I needed the fridge. The only reason I
ordered from you was that you told me I could have it
today. If you can’t give it to me today, you can just keep
your fridge!! I don’t want it anymore.” Mavis then rang
Quick Fridge and ordered and received another fridge
that afternoon– suitable for her requirements.
However, one month later, Whitegoods
World delivered the fridge originally
ordered and demanded payment. Mavis
refused to accept the fridge or to pay,
and advised them that the order had
been cancelled. They are threatening to
sue Mavis for the price of the fridge $5,500.
AUSTRALIAN CONSUMER
LAW
Consumer Guarantees
Revise: How to read a statute
E.g.
Australian Consumer Law s18
Misleading or deceptive conduct
(1) A person shall not, in trade or
commerce, engage in conduct that is misleading or
deceptive or is likely to mislead or deceive.
Elements of a section:
Person
In trade or commerce
Engage in conduct
Misleading or deceptive
Defined by legislation (definitions section) or
by courts (case law.)
Legislation
Competition and Consumer Act 2010 (Cth)
◦Schedule 2 - Australian Consumer Law
◦Application scheme
◦Commonwealth Act – only applies to
corporations
◦Why?
NON-CORPORATES
GOVERNMENTS
Issue: Path to National law?
Productivity Commission
◦ Referral of power by States – s51(xxxvii)
◦ States: NO
Application scheme
◦ Australian Consumer Law (ACL) – Schedule Two,
Competition and Consumer Act 2010 (Cth)
◦ New law, agreed by COAG
Application Scheme
How does Australian Consumer Law
(ACL) apply to all jurisdictions in
Australia?
Why do we find it at Schedule 2 of the
Competition and Consumer Act 201o
(Cth)?
Application Scheme?
Commonwealth lead legislator
National Partnership Agreement to Deliver a Seamless National
Economy (2008)
Intergovernmental Agreement for the Australian Consumer Law (July
2009)
Trade Practices Amendment (Australian Consumer Law) Act (No 1)
(2010) (Cth)
Trade Practices Amendment (Australian Consumer Law) Act (No 2)
(2010) (Cth)
Competition and Consumer Act 2010
(Cth) Part XI
s 131
Application of the Australian Consumer Law in relation to
corporations etc.
(1) Schedule 2 applies as a law of the Commonwealth to the conduct
of corporations, and in relation to contraventions of Chapter 2, 3 or 4
of Schedule 2 by corporations.
Fair Trading Act 1987 (NSW) Part
3
28 Application of Australian Consumer Law
(1) The Australian Consumer Law text, as in force from time to time:
(a) applies as a law of this jurisdiction, and
(b) as so applying may be referred to as the Australian Consumer Law
(NSW), and
(c) as so applying is a part of this Act.
(2) This section has effect subject to sections 29, 30 and 31.
The
Cons
ume
r
Guar
ante
es
Overview of ACL
Overview of ACL
Chapter One
◦ Machinery provisions, definitions etc
Chapter Two – General Consumer Protections
◦ Misleading and deceptive conduct (s52); Unconscionable conduct(Part IVA); Unfair
contract terms (New – cf Victoria)
Chapter Three – Specific protections
◦ Consumer guarantees (Part V Div 2/2A); Product Safety (Part VA); Product liability
(Part V Div 1A)
Chapter Four – Criminal offences
◦ For breach of Chapter 3 (Part VC)
Chapter Five – Enforcement and Remedies
◦ (Part VI)
Consumer Guarantees
Part 3-2--Consumer transactions
Division 1--Consumer guarantees
◦ Subdivision A--Guarantees relating to the supply of
goods
◦ Subdivision B- Guarantees relating to the supply of
services
◦ Subdivision C--Guarantees not to be excluded etc. by
contract
◦ Subdivision D--Miscellaneous
Subdivision A: Goods
Guarantee as to:
51 - title
52 -undisturbed possession
53 - undisclosed securities
54 - acceptable quality
55 - fitness for any disclosed purpose
56 - supply of goods by description
57 - supply of goods by sample
58- repairs and spare parts
59 - express warranties
Overview
http://www.abc.net.au/tv/thecheckout/clips/#
Returning goods
56 Guarantee relating to the supply of
goods by description
(1) If:
(a) a person supplies, in trade or commerce, goods by description
to a consumer; and
(b) the supply does not occur by way of sale by auction;
there is a guarantee that the goods correspond with the
description.
Common elements
a person supplies, in trade or commerce,
goods to a consumer
Common Elements:
 Person/corporation
 Supply
 Trade or commerce
 Goods
 Consumer
S2:trade or commerce
trade or commerce means:
(a) trade or commerce within Australia; or
(b) trade or commerce between Australia
and places outside Australia;
and includes any business or professional activity
(whether or not carried on for profit).
And case law
S2: goods
goods includes:
(a) ships, aircraft and other vehicles; and
(b) animals, including fish; and
(c) minerals, trees and crops, whether on, under or
attached to land or not; and
(d) gas and electricity; and
(e) computer software; and
(f) second-hand goods; and
(g) any component part of, or accessory to, goods.
S3: consumer
(1) A person is taken to have acquired particular goods as a consumer if,
and only if:
(a) the amount paid or payable for the goods, as worked out
under subsections (4) to (9), did not exceed:
(i) $40,000; or ….
(b) the goods were of a kind ordinarily acquired for personal,
domestic or household use or consumption; or
(c) the goods consisted of a vehicle or trailer acquired for use
principally in the transport of goods on public roads.
(2) However, subsection (1) does not apply if the person acquired the
goods, or held himself or herself out as acquiring the goods:
(a) for the purpose of re-supply; or
(b) for the purpose of using them up or transforming them, in
trade or commerce:
(i) in the course of a process of production or
manufacture; or
(ii) in the course of repairing or treating other goods or
fixtures on land.
‘ordinarily acquired for personal,
domestic or household use or
consumption’
 Not just personal use
 Business use as well
 e.g. Carpet in a nightclub (Carpet Call v Chan (1987) ATPR (Digest) 46025)
 Not just goods of a kind used in households
 Commercial versions of domestic products as well
 E.g. Commercial grade, decoratively coated insulation in Bunnings
warehouses (Bunnings v Laminex [2006] FCA 682)
 Mixed use? Common sense approach
 E.g even though ostrich egg incubator could be used for home
hobbies, if used commercially not consumer
(Crago v Multiquip (1998) ATPR 41-620 )
56 Guarantee relating to the supply of goods by
description
(1) If:
(a) a person supplies, in trade or
commerce, goods by description to a consumer; and
(b) the supply does not occur by way of
sale by auction;
there is a guarantee that the goods correspond with
the description.
S56: elements
Common elements
Supply by description
Guarantee of correspondence with
description
Case law
UK Sale of Goods Act
Sale of Goods Act 1923 (NSW)
Trade Practices Act 1974 (Cth)
Presumptions in statutory
interpretation
Case Law
Ashington Piggeries v
Christopher Hill
[1971] 1AllER847
Sale/Correspondence
with description
Grant v Australian Knitting
Mills (1936) 54 CLR 49
Ashington Piggeries case:
 Viscount Dilhorne:
Did the presence of DMNA merely
affect the quality of the herring meal
or did it make a difference in kind? If
the former, then there was no failure
to deliver in accordance with the
description. If the latter, there was.”
“
55 Guarantee as to fitness for any disclosed purpose etc.
(1) If:
(a) a person (the supplier) supplies, in trade or commerce, goods to a
consumer; and
(b) the supply does not occur by way of sale by auction;
there is a guarantee that the goods are reasonably fit for any disclosed purpose,
and for any purpose for which the supplier represents that they are reasonably fit.
(2) A disclosed purpose is a particular purpose (whether or not that purpose
is a purpose for which the goods are commonly supplied) for which the goods are
being acquired by the consumer and that:
(a) the consumer makes known, expressly or by implication, to:
(i) the supplier; or
(ii) a person by whom any prior negotiations or arrangements in
relation to the acquisition of the goods were conducted or made; or
(b) the consumer makes known to the manufacturer of the goods either
directly or through the supplier or the person referred to in paragraph (a)(ii).
(3) This section does not apply if the circumstances show that the consumer
did not rely on, or that it was unreasonable for the consumer to rely on, the skill or
judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the
manufacturer, as the case may be.
S55: elements
Common elements
Particular purpose made known by
consumer
Consumer relied on skill/judgement of
supplier
Reasonable to rely
Case Law
Purpose made known?
 Obvious purpose?
 Underpants – Grant v Australian
Knitting Mills
Reliance on seller’s judgement?
 Ashington Piggeries v
Christopher Hill
S54: Guarantee as to
acceptable quality
(1) If:
(a) a person supplies, in trade or commerce, goods to a consumer; and
(b) the supply does not occur by way of sale by auction;
there is a guarantee that the goods are of acceptable quality.
(2) Goods are of acceptable quality if they are as:
(a) fit for all the purposes for which goods of that kind are commonly
supplied; and
(b) acceptable in appearance and finish; and
(c) free from defects; and
(d) safe; and
(e) durable;
as a reasonable consumer fully acquainted with the state and condition of the goods
(including any hidden defects of the goods), would regard as acceptable having
regard to the matters in subsection (3).
(3) The matters for the purposes of subsection (2) are:
(a) the nature of the goods; and
(b) the price of the goods (if relevant); and
(c) any statements made about the goods on any packaging or label on
the goods; and
(d) any representation made about the goods by the supplier or
manufacturer of the goods; and
(e) any other relevant circumstances relating to the supply of the goods.
Case Law
‘fit for all the purposes for which goods of that kind are
commonly supplied’
Rasell v. Garden City Vinyl and Carpet Centre Pty Ltd
(1991) ATPR 41-152
Carpet Call Pty Ltd v Chan (1987) ATPR 41-025
Remedies
Breach of contract:
◦ Remedies on the contract
◦ e.g damages
Breach of term implied into the contract:
◦ Sale of Goods Act
◦ Remedies on the contract
Breach of statutory guarantee
◦ Australian Consumer Law
◦ Remedies provided by statute
SOURCE OF RIGHTS GOVERNS THE REMEDIES
Flooring:
Mavis was particularly interested in flooring as she had
difficulties keeping her slate tiles clean. She searched for
low maintenance flooring and after extensive shopping
decided on single sheet vinyl flooring. She saw just the
thing at Discount Lino Barn, close to Kylie’s home. Kylie
indicated that she didn’t share her mother’s preference
for vinyl flooring as it was cold underfoot and had
suggested kitchen carpet. Kylie and Mavis spoke to Mike
at Discount Lino Barn who suggested under-floor heating
could address Kylie’s temperature issues. Kylie provided
details of the under floor heating options while her
mother left the conference room to offer slices of her
coffee cake to the other staff….
She is also angry about the flooring she has had
installed. Despite Kylie’s protests she went with the
single sheet vinyl, and did not have under floor heating
installed. The vinyl, while easier to clean than the slate,
is marking and scuffing badly however. She has only had
it down 6 months, and already there are a number of
wear marks. Her cupcake classes – which she runs 5
times a week and more often in school holidays – are
now so popular that she has at least 20 students per
class. Because of her renovations she has room for them
all around her lovely new island bench, but the vinyl
around the island bench almost looks like a race track.
It is as if her students have worn a path around
the bench – and in only 6 months.
The vinyl was quite expensive – as she had heavy
grade domestic installed – but Mavis is very
unhappy. She hasn’t yet paid the bill for the vinyl
as she has been arguing with the company. They
are, according to Mavis, now getting nasty, and
want their $45,000 immediately.
Oven
Mavis returned to the conference room. She
advised that she had had to make a large coffee
cake that morning, even though her preference
would have been to make cup-cakes. In fact, one
of her legal problems was her cup-cake oven.
Cake Cookers is a specialist retailer which sells
products designed for those who like to cook
cakes. It retails a number of specialist pans and
other baking utensils – many imported from
America and not readily available in Australia - as
well as a special range of cake ovens.
They are located in Broome – and Mavis lives
in NSW, but Cake Cookers sells throughout
Australia by catalogue. Mavis wanted a
special cake oven in her new kitchen. She
saw an oven that looked perfect for her in
their catalogue – the picture showed 8 slide
out patty pan trays instead of oven trays –
exactly what she wanted.
She rang the store and spoke to Cathy. She told
Cathy all about her cupcakes, her favourite
recipes, and her interest in the patty pan oven
in their catalogue. Cathy told her that the patty
pan oven had eight slide out patty pan holders –
instead of oven racks – and that each patty pan
holder would take one dozen patty pans. Even
better, they came with self cleaning silicone
inserts. Mavis was delighted about the self
cleaning but concerned that each tray would
only take one dozen patty pans. Although after
discussion with Cathy, she was convinced that
the overall capacity of the oven was
appropriate, and so she placed an order….
Mavis advised that even if she had known about the cake
order she would have had difficulty fulfilling it because of
problems with her newly installed cake oven. When the
oven arrived she saw that instead of Australian sized
delicate patty pan holders, the cake trays were American
size muffin holders – and two trays were even jumbo sized
Texas muffin size holders. This is not what Mavis wanted at
all.
Mavis rang Cathy and told her the oven was not what she
had wanted at all, and not suitable for the cakes in which
she specialised. Cathy said she was sorry that Mavis was
disappointed, but there is nothing that they can do about it
now. Mavis wants to know if she still has to pay the $8,000
for the special cake oven.